Buying a home is the dream for many Canadians, but behind the glamour of owning a home and designing it to your taste is the reality of mortgage payments.

Here’s a quick breakdown of how you can budget for your mortgage payments.

Track All Sources of Income
Before you even begin shopping around for a mortgage or your dream home,  you should sit down and figure out how much you can actually afford to pay. Do this by writing down your monthly take-home pay from your primary job and any reliable side-gigs you may have on the go.

If you bring home $1,800 biweekly and your partner brings home $1,400, then you have a total budget of $6,400 to work with.

Plan for Regular Expenses
Next, you and your partner should take a look at your expenses and track all of the costs you know you will be paying every month for the foreseeable future. This should include your current rent, utilities, transportation, groceries, and any contributions you are making to your retirement plans.

Your personal expenses may look like:

  • Rent = $1,200
  • Utilities = $400
  • Transportation = $500
  • Groceries = $450
  • Personal Care (clothing, hair, etc.) = $500
  • Recreation = $250
  • Savings = $2,000
  • Vacation = $450

Factor in the 25% Rule
The general rule of thumb that all financial institutions and mortgage brokers follow is the 25% rule. What this means is that, if you are looking to purchase a house, your mortgage payments should not exceed 25% of your take-home pay.

If we continue to use our hypothetical budget, then that would mean your ideal mortgage payment would be $1,600 a month ($6,400 x 25% = $1,600).

This mortgage payment should replace the rent amount in your existing budget and may require you to deduct money from other areas to cover the increase and property taxes. By planning wisely and following the 25% rule will keep your mortgage payment from causing any undue stress going forward.

Buying your first home is a scary prospect for many Canadians, especially with COVID-19 causing so much uncertainty in the market, but on top of the aid being offered to Canadians by the Government, Canada’s largest banks are offering deferred mortgage payment options for homebuyers. Give me a call today at (306) 220-0425 or visit my website and see how I can help you find the mortgage that will make your dream come true.